Question submission date: March 2023

Full Question: “I haven’t had a contract for a while, so I’ve not been working through my Limited Company – do I still need an Accountant?”

If you’re no longer using your Limited company, it’s worth considering your plans longer term when deciding whether to close it altogether, or to register it as dormant. For each of these options, there are some filings and submissions you’re obliged to make by HMRC and Companies House. So, let’s start with a brief explanation of what is required for each:

Registering your Limited Company as Dormant

Perhaps, you’re out of contract but waiting for the next opportunity, or you’re unsure yet of your future plans but would like to protect your company name and brand. If closing your company seems all too permanent, you can keep your company but register it as dormant with companies house and HMRC.

HMRC’s conditions of dormancy are that you can let it become ‘dormant’ for tax as long as it’s not carrying on any business activity, trading or receiving any income. This means absolutely no transactions going through your company at all – so if you’ve still bills to settle, taxes to pay and some loose ends to tie up then you won’t meet these conditions – when Companies House or HMRC describe dormant, they do mean ‘fully dormant’.

A dormant company is still registered at Companies House, and regardless of zero transactions or activity, you’ll need to submit annual dormant accounts and confirmation statements. You’ll need to notify HMRC of the dormancy (you can do this by giving them a call), similarly you must also tell them once and if you begin trading again. If your company is registered for VAT and PAYE, you’ll need to de-register from these services.

It may be that you don’t quite fit into the above criteria, and if you can’t quite class your company as dormant for example you may have a low number of transactions going through your company and have a period of no income, it’s worth talking your situation through with your accountant to discuss your needs. Without being fully ‘dormant’ you’ll need to submit things such as full annual accounts, VAT and PAYE submissions (if you’re still registered).

Closing your Limited Company

If closing your company is the route you’ve decided, there are some things you’ll need to consider, outlined in our Guide to Closing Your Company and your accountant will be on hand to advise the most appropriate way to do this. They’ll also be able to file your final accounts, corporation tax submissions, file the company closure with companies house (submitting a DS01 form) and submit your final confirmation statement.

Some accountancy firms will take into account your period of inactivity and recommend a reduced fee, so it’s best to discuss your business’ requirements with them to talk about their fee structure.